School districts are often asked what happens to the money collected by marijuana taxes. Here's a breakdown of that.
Kelly Ragan

This story is part of "Sacrificing Our Schools," a yearlong Coloradoan series on public school funding in Colorado brought to you with financial support from Choice Organics.

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Principal Greg Dent wears a hard hat as he walks through construction zones at Hudson Elementary School in Hudson on Wednesday, April 4, 2018. Taxes collected from recreational marijuana sales in the state went to partially fund the project.(Photo: Austin Humphreys/The Coloradoan)Buy Photo

When Greg Dent first took on the role of principal at Hudson Academy of Arts and Sciences nine years ago, the town had only dirt roads. Things have changed since then.

More houses are going up, and growth edges toward the town, situated northeast of the Denver metro area on Interstate 76, from bigger cities.

The roads are paved now, and soon the town will have a new elementary school.

The old school was built in the 1960s. It was built with asbestos and it isn’t up to ADA standards. Wi-Fi often can’t get through the walls, even with hotspots to boost the signal.

A mix of construction and demolition began last May. A new two-story school connects to the old gymnasium and cafeteria.

The cost of the new school is $17 million, said Weld Re-3J Superintendent Greg Rabenhorst.

Almost a quarter of that cost will be funded by a grant from the BEST — Building Excellent Schools Today — fund, a capital construction fund boosted by sales tax revenues from marijuana in Colorado. BEST also gets money from Land Board proceeds, the Colorado Lottery and interest from in the Public School Capital Construction Assistance Fund.

For Hudson Academy, it granted $4.2 million to help build the new school.

But it was not a magic pill. The district still had to pass a mill levy override to the tune of $61 million to address other needs in schools throughout the district.

“If we didn’t pass the mill levy override, we were going to close the building,” Dent said.

They got a lot of questions about funding.

Many folks wondered why the money raised from marijuana taxes couldn’t cover the cost of the new school and necessary renovations in other schools.

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Dave Montoya, executive director of finance at PSD, said he often talks to folks who think funding from the marijuana tax fixed Colorado's school funding woes. Many voters, he said, felt Amendment 64 was portrayed as an overarching solution.

Each time someone asks what the deal is with the marijuana money, he tries to explain the situation in hopes the understanding will spread.

“It’s just not the silver bullet voters thought it would be,” PSD spokeswoman Danielle Clark said.

Marijuana money's role

To the average person, Rabenhorst said, $40 million sounds like a lot of money.

That's how much money comes into the BEST capital construction fund from marijuana sales taxes each year.

“But this one school costs $17 million,” Rabenhorst said. And there are 178 school districts in Colorado competing for the same funds.

With the passage of Amendment 64, which legalized recreational marijuana in Colorado, voters approved a 28 percent sales tax on retail marijuana products. That includes a 15 percent excise tax to benefit K-12 education in Colorado.

Of that 15 percent, the first $40 million each year goes to the BEST fund. In fiscal 2015-16, voters approved a one-time bump to the BEST fund, bringing the total pot to $80 million.

BEST distributes funds through grants for construction. Schools with needs involving health, safety and security issues are priority. Districts often must match BEST funds with local district money.

PSD has yet to get any money from the BEST fund. More rural districts are typically chosen for those capital construction projects.

Montoya reiterated Rabenhorst's point that $40 million per year doesn’t really go that far. When you divide that by 178 districts, it comes to just less than $225,000 per district, per year.

To put in perspective, a single school roof costs about $500,000, Montoya said.

According to the Colorado Department of Education's website, BEST legislation is intended to address health and safety issues by providing funds to rebuild, repair or replace the state's most dangerous and most needy K-12 facilities.

Because rural districts can't rely on raising mill levy overrides or issue bonds — there are fewer homes in those districts, so the burden is heavier on those who do own property — they are more likely to meet the requirements of "most dangerous and needy K-12 facilities."

And because PSD hasn't yet asked for funding for projects that fall into that category, the district hasn't been awarded grants for construction projects.

A nine-member board reviews grant applications from public school districts, charter schools and institute charter schools, boards of cooperative educational services and the Colorado School for the Deaf and Blind.

"You have two minutes to present your case," said Meg Hohnholt, project manager at Weld Re-3J.

The board can ask questions, Hohnholt said, and applicants can bring a team up to help answer those questions. Weld Re-3J had a team of eight people, including contractors, architects and the director of finance.

The Colorado Board of Education awards points to applicants based on need. The results are projected on a screen for all to see. The applicants with the most points are awarded funding.

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Construction continues on renovations to Hudson Elementary School in Hudson on Wednesday, April 4, 2018. Taxes collected from recreational marijuana sales in the state went to partially fund the project. (Photo: Austin Humphreys/The Coloradoan)

Other marijuana funded programs

Poudre School District has so far received and used about $2 million in grants from marijuana taxes outside of BEST funding for capital construction projects. But that's less than 1 percent of its overall annual budget of $270 million.

Any of the 15 percent excise tax on marijuana that exceeds $40 million goes toward the general public school fund, though voters approve a one-time $40 million boost for BEST in 2015-16. So far, the only listed time the state collected funds for the public school fund from the excise tax was fiscal 2016-17, for an additional $5.7 million.

Schools can also apply for grants through the Marijuana Tax Cash Fund, which is funded by a 2.9 percent sales tax on retail marijuana and a 2.9 percent sales tax on medical marijuana. The money is in a pot separate from the BEST fund. That money can be used for things like adding health professionals, intervention and prevention services, and substance abuse programs.

The limitation with grant money, however, is that it runs out. Grants aren’t an ongoing source of income for schools, so districts can’t factor them into long-term budgets or use them to pay teachers.

The money from the Colorado Department of Education’s Student Re-engagement Grant Program, $216,740 the first year, $93,058 the second year, helped establish Opportunities Unlimited at Poudre High School. It’s a program designed to help struggling students to re-engage in school and get back on track to graduate.

With on-time graduation rates dipping to 78.6 percent for the class of 2017 from 2016’s 81.4 percent, it's an area of concern for the district.

The district hopes to figure out a way to continue the program when that grant funding stops, Clark said.

Since the money afforded through grants is limited, Clark said districts don’t use them to fund core positions, such as teachers, which make up about 80 percent of PSD’s budget.

“That work must go on regardless of the grants,” Clark said. “Our costs are people-heavy because we provide a service.”

Adjustments

There have been some adjustments to the formula.

In July 2017, 10 percent of the 15 percent state marijuana retail tax revenue was allocated to local governments and distributed according to the percentage of marijuana sales within city and/or county boundaries, according to the Colorado Department of Education.

In the 2017-18 fiscal year, the state dished out the remaining 90 percent of total retail tax revenue like this:

28.15 percent, minus $30 million, to the General Fund

71.85 percent credited to the Marijuana Tax Cash Fund

$30 million to the state public school fund for rural school districts, with 55 percent going to large rural districts and 45 percent to small rural districts

For the 2018-19 fiscal year, the funds will look a little different:

15.56 percent will go to the General Fund

71.85 percent will be credited to the Marijuana Tax Cash Fund

12.59 percent will be credited to the state public school fund and distributed to all districts

Those changes mean nonrural districts like PSD could have access to more funds.

Despite some frustrations, BEST funding does offer some reprieve and has allowed some districts to give new life to crumbling schools.

During a recent Wednesday morning, elementary schoolers spill out of Hudson Academy of Arts and Sciences and run to the playground for gym class and recess. It doesn’t seem to bother them too much that, for now, their small playground has been replaced with a mulch pile.

Soon they’ll be able to play on a full-sized soccer field. They’ll have a classroom for art and music classes. They’ll have a bigger space to work with kids who have special needs. The early morning school drop-off traffic won’t jam up half the town.

The mulch might not be as fun as the little swing set that used to be the playground’s staple. But they still laugh and enjoy the spring sunshine as they prepare to get settled in their new classrooms.

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Construction continues on renovations to Hudson Elementary School in Hudson on Wednesday, April 4, 2018. Taxes collected from recreational marijuana sales in the state went to partially fund the project. (Photo: Austin Humphreys/The Coloradoan)

What Poudre School District received

In 2014-15, PSD applied for and received a grant for $81,556 from recreational marijuana funds from the Colorado Department of Education School Health Professionals Grant Program. The district used the funds for substance abuse prevention. In 2015-16, the district applied for the grant again and received $98,353.

In December 2016, PSD applied for a bullying prevention grant funded by marijuana tax dollars. The district received $437,824 for 2.5 years of bullying prevention activities at Lesher, Wellington, Blevins and Preston middle schools. That money went toward funding school counselors to implement bullying prevention curricula and activities at each school.

In spring 2016, PSD applied to the Colorado Department of Education’s Student Re-engagement Grant Program and received $216,740 for drop-out prevention and student engagement programs at three high schools. The district will also receive $93,058 from the same grant fund to provide a second year of funding.

The district also applied for and received $1,155,060 over three years to fund counselors at Rocky Mountain, Poudre and Fort Collins high schools to work on behavioral health and disciplinary issues as well as counselors at Irish and Laurel Elementary for substance abuse prevention and behavioral health issues.

How marijuana boosted the education budget

2017-18

Marijuana revenue for the Colorado Department of Education: $90.3 million

Overall state K-12 education funding: $5.6 billion*

2016-17

Marijuana revenue for CDE: $54.2 million

Overall state K-12 education funding: $5.4 billion

2015-16

Marijuana revenue for CDE: $86.3 million

Overall state K-12 education funding: $5.3 billion*

*This is the amount appropriated in the long bill for the budget of CDE, the Charter School Institute and The Colorado School for the Deaf and the Blind.